The managing director of a limited company: authority and responsibility
The managing director is the person who conducts the management of a limited company and the carrying on of its activity, within the limits set by the body that appointed him or her. The frame is on company registration. A change of managing director, or an amendment of the contract, is on the amendment page. A power of attorney in company dealings is on its page.
Who appoints and removes the managing director?
In a joint-stock company, the board of directors appoints the managing director, fixes that person's remuneration and the limits of the work, supervises the activity, gives directions, and may remove him or her, under article 117, first paragraph. In a limited company, a partnership or a sole proprietorship, appointment and removal are read from the body named by the company contract and by the text. The managing director is removed by a reasoned decision of the body that appointed him or her, and a deputy is likewise removed by a reasoned decision of the body that appointed the deputy, under article 122 after Amendment Law No. 17 of 2019.
A deputy may be appointed for the company, to stand in for the managing director in case of absence, and by the same method of appointment, under article 121, third paragraph, which was added to article 121 by that Law. The first and second paragraphs of article 121, as they appear in some extracts, deal with the allocation of fees collected, and are distinct from the deputy's authority organised in the third paragraph.
What are the limits of the authority?
The managing director carries out all acts necessary for the management of the company and the carrying on of its activity, within the competences and powers defined for him or her by the appointing body and in accordance with its directions, under article 123, first paragraph. In a limited company, a partnership and a sole proprietorship, the managing director has the powers of the board that appear in paragraphs second to sixth of article 117, subject to the first paragraph of article 123. That does not free the managing director from the company contract or from the decisions of the general assembly.
The general assembly remains the highest body in the company under article 102, and its meeting and minutes are on the meeting page. An internal delegation that is not read in the light of article 123 does not replace the written limits of authority, and does not replace a power of attorney when the company is to be represented before a notary public or before another body, within the limits of the powers-of-attorney page.
Where does responsibility appear?
Liquidation does not release the founders, the members, or the officers of management from a liability that arose while they were carrying on their activity in the company, under article 165, if the company reaches the stage of liquidation. In day-to-day management, the care required of a board in a joint-stock company is read from article 120: they must take in the company's affairs the care they take in their own, without falling below the care of an ordinary person of their standing, and they are responsible to the general assembly for any act they do in that capacity. The managing director of a limited company, within what that person has undertaken, is measured against this duty of care and against the limits in article 123.
Article 4, third paragraph, prevents the owners of capital from using their voting powers, or other powers, to harm the company for their own benefit at the expense of the other owners, or to endanger creditors' rights by withdrawing capital or transferring assets when insolvency is imminent or when the law so prohibits. That limit is read alongside the managing director's responsibility, not as a substitute for it. Partners' disputes and a request for liquidation are on their page.
The Law Office of Ali Barakat follows this reading of the authority from Baghdad, al-Yarmouk.
Legal basis and sources
Frequently asked questions
Who removes the managing director of a limited company?
Article 122 makes removal a reasoned decision of the body that appointed him or her. In a limited company that body is read from the company contract and from the text, unlike a joint-stock company, where the board appoints and removes the managing director under article 117, first paragraph.
What does article 121, third paragraph, provide?
Article 121, third paragraph, added by Law No. 17 of 2019, allows a deputy managing director to be appointed, to stand in for the managing director in case of absence, and by the same method of appointment. The first and second paragraphs of article 121 deal with the allocation of fees collected, and are distinct from the deputy's authority in the third paragraph.
Are the powers of a limited company's managing director unlimited?
No. Article 123 confines them to what the appointing body has defined and to its directions, together with the powers in paragraphs second to sixth of article 117 where those apply. The general assembly remains the highest body under article 102.
Related topics and articles
- 01Amending the company contract, changing the managing director and transferring sharesAmending the company contract, changing the managing director and transferring shares under Companies Law No. 21 of 1997 as amended.
- 02General assembly meetings, quorum and minutesA general assembly meeting: the invitation, quorum, minutes and decisions under the Companies Law, and sending those decisions to the Registrar.
- 03Powers of attorney and delegation in company dealingsA power of attorney in company dealings is read from the Civil Code and article 91 for assembly meetings.
- 04Obligations that recur after a company is recordedFinal accounts, the audit, the general-assembly meeting and copies sent to the Registrar, distinct from post-incorporation steps and from branch duties.
- 05The address of a company or branch, a lease and a title deedThe company's address in its contract, before the Registrar and in the commercial register; a lease or deed may evidence it. Not a real-estate page.